Goldman Sachs reported that US monthly tax receipts are sufficient to cover interest on our debt, monthly Social Security checks, Medicare and essential defense costs. Jay Carney, WH press secretary, said, "We lose our borrowing authority and that would be a bad thing."
I beg to differ. Our debt is a bad thing and all this excessive borrowing without the means to pay it back is a bad thing. We need to put a freeze on new spending bills and begin to roll back spending on literally everything else.
Social Security can pay for itself by increasing FICA tax to 10% and eliminating the $106,800 collection ceiling. Unfortunately politicians want to use SS to scare old people, so I don't expect to see any substantial change.
Thursday, July 28, 2011
Saturday, July 16, 2011
America, the Beautiful – what a great idea that was
Elected officials care more about staying in office and maintaining the power structure of their political parties than taking the hard steps to save this country. We have a president and Congress that only want to keep the economy going through the next election. Then what?
I have no doubt, President Obama will be re-elected. He's going to have a billion dollars in his campaign chest to ensure that result and gloves will be coming off. The 2008 election was about Hope and Change, the 2012 election will be about destroying the opposition. Expect a blizzard of attacks against the Republican Party and vice versa. It is going to be ugly.
Will any of this “Sturm und Drang” bring about an “Age of Enlightenment” or a new American Revolution. Not a bit. Nothing will be done by our partisan government and all the horrible things being predicted by both parties will happen. We will eventually default, our debt will outdistance our ability to pay interest and no raising of the debt ceiling will help.
We're not asking the “right” questions and we certainly are not looking for the “right” solutions. Unemployment is a symptom of our economic problems and dumping tax dollars into select businesses isn't going to help anymore than “shovel ready” jobs did.
Work programs are not the answer, just as they were not the answer during the Great Depression. It took the massive government and private sector spending of WWII to truly stimulate the economy. Afterwards we had a world to rebuild and the Soviet Union as a common enemy to stir up our creative juices.
I believe we face another fifteen to twenty years of economic decline taxing and sucking the American Spirit dry, unless we look for solutions that will effectively turn our economy around. What do we really need?
Well, we need more revenue coming in and we need less debt. How do we do this? Are we really so stupid that we can't figure this out? No, we've just tied ourselves to ideologies that are unyielding to compromise and refuse to see anything positive in the opposition.
We need to see real income and revenue figures before deciding on raising or cutting taxes. Loopholes, subsidies, deductions, and exemptions also confuse the tax issue. Warren Buffet says he pays too little in taxes, but if all his loopholes, etc., went away that wouldn't be the case. He probably would end up wanting his taxes cut, along with the rest of us.
Everyone who itemizes deductions does so because it reduces their payment in taxes substantially no matter what their tax rate is. By eliminating all loopholes and deductions, the individual tax rate could be lowered without reducing the revenue generated by the tax.
For example, someone in the 35% tax bracket may actually pay only 17% in taxes after all legal deductions, exemptions, and loopholes are taken. It would be possible to generate more tax revenue from this individual if the tax rate were lowered to 25% and all loopholes abolished. In the case of Warren Buffet, this would generate million of additional taxes, and, what the heck, he says he would welcome it.
There are corporations and individuals that currently pay zero in taxes. I would advocate that we not levy an income tax against the first $25,000 in earnings or capital gains. That would protect lower wage earners and senior citizens. I would like to see a graduated flat tax levied on all other income levels starting at 10% up to 25%. This would necessitate allowing no loopholes, deductions, or exemptions of any kind, including property tax deductions, charitable contributions, personal exemptions, and the like. There would be absolutely no itemized or standard deductions.
Each political party cooks the financials to support their own economic theories. I'm not an economist or accountant, but I am a student of history. We've gotten ourselves into this mess by overspending and not balancing our budget. What happens to individuals will happen to governments eventually.
Congress has been trying to spend our way out of every problem in our path and impress all the neighbors that we have bottomless pockets. If we did, why did we borrow in the first place?
We need to stop borrowing, add no new spending programs, and cut every existing program including the military and social security by ten percent. (We could increase FICA tax to nine or ten percent, which is what I paid for my state retirement program, and eliminate the current ceiling cap of $106,800. This probably would offset the need to reduce SS by 10%.)
After this spending freeze and cuts are in place, we could then begin paying off our smallest debts first and continue paying interest on the rest. This would mean that no new money would be returning back to the States until a significant portion of the national debt is paid off in ten to twelve years.
Unfortunately, greed and self interest will probably reign supreme in Congress and the White House no matter who is in power. America, the Beautiful – what a great idea that was.
O beautiful for spacious skies,
For amber waves of grain,
For purple mountain majesties
Above the fruited plain!
America! America! God shed His grace on thee,
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for pilgrim feet,
Whose stern impassion'd stress
A thoroughfare for freedom beat
Across the wilderness!
America! America! God mend thine ev'ry flaw,
Confirm thy soul in self-control,
Thy liberty in law!
O beautiful for heroes proved In liberating strife,
Who more than self their country loved,
And mercy more than life!
America! America! May God thy gold refine
Till all success be nobleness,
And ev'ry gain divine!
O Beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam,
Undimmed by human tears!
America! America! God shed His grace on thee,
And crown thy good with brotherhood
From sea to shining sea!
I have no doubt, President Obama will be re-elected. He's going to have a billion dollars in his campaign chest to ensure that result and gloves will be coming off. The 2008 election was about Hope and Change, the 2012 election will be about destroying the opposition. Expect a blizzard of attacks against the Republican Party and vice versa. It is going to be ugly.
Will any of this “Sturm und Drang” bring about an “Age of Enlightenment” or a new American Revolution. Not a bit. Nothing will be done by our partisan government and all the horrible things being predicted by both parties will happen. We will eventually default, our debt will outdistance our ability to pay interest and no raising of the debt ceiling will help.
We're not asking the “right” questions and we certainly are not looking for the “right” solutions. Unemployment is a symptom of our economic problems and dumping tax dollars into select businesses isn't going to help anymore than “shovel ready” jobs did.
Work programs are not the answer, just as they were not the answer during the Great Depression. It took the massive government and private sector spending of WWII to truly stimulate the economy. Afterwards we had a world to rebuild and the Soviet Union as a common enemy to stir up our creative juices.
I believe we face another fifteen to twenty years of economic decline taxing and sucking the American Spirit dry, unless we look for solutions that will effectively turn our economy around. What do we really need?
Well, we need more revenue coming in and we need less debt. How do we do this? Are we really so stupid that we can't figure this out? No, we've just tied ourselves to ideologies that are unyielding to compromise and refuse to see anything positive in the opposition.
We need to see real income and revenue figures before deciding on raising or cutting taxes. Loopholes, subsidies, deductions, and exemptions also confuse the tax issue. Warren Buffet says he pays too little in taxes, but if all his loopholes, etc., went away that wouldn't be the case. He probably would end up wanting his taxes cut, along with the rest of us.
Everyone who itemizes deductions does so because it reduces their payment in taxes substantially no matter what their tax rate is. By eliminating all loopholes and deductions, the individual tax rate could be lowered without reducing the revenue generated by the tax.
For example, someone in the 35% tax bracket may actually pay only 17% in taxes after all legal deductions, exemptions, and loopholes are taken. It would be possible to generate more tax revenue from this individual if the tax rate were lowered to 25% and all loopholes abolished. In the case of Warren Buffet, this would generate million of additional taxes, and, what the heck, he says he would welcome it.
There are corporations and individuals that currently pay zero in taxes. I would advocate that we not levy an income tax against the first $25,000 in earnings or capital gains. That would protect lower wage earners and senior citizens. I would like to see a graduated flat tax levied on all other income levels starting at 10% up to 25%. This would necessitate allowing no loopholes, deductions, or exemptions of any kind, including property tax deductions, charitable contributions, personal exemptions, and the like. There would be absolutely no itemized or standard deductions.
Each political party cooks the financials to support their own economic theories. I'm not an economist or accountant, but I am a student of history. We've gotten ourselves into this mess by overspending and not balancing our budget. What happens to individuals will happen to governments eventually.
Congress has been trying to spend our way out of every problem in our path and impress all the neighbors that we have bottomless pockets. If we did, why did we borrow in the first place?
We need to stop borrowing, add no new spending programs, and cut every existing program including the military and social security by ten percent. (We could increase FICA tax to nine or ten percent, which is what I paid for my state retirement program, and eliminate the current ceiling cap of $106,800. This probably would offset the need to reduce SS by 10%.)
After this spending freeze and cuts are in place, we could then begin paying off our smallest debts first and continue paying interest on the rest. This would mean that no new money would be returning back to the States until a significant portion of the national debt is paid off in ten to twelve years.
Unfortunately, greed and self interest will probably reign supreme in Congress and the White House no matter who is in power. America, the Beautiful – what a great idea that was.
O beautiful for spacious skies,
For amber waves of grain,
For purple mountain majesties
Above the fruited plain!
America! America! God shed His grace on thee,
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for pilgrim feet,
Whose stern impassion'd stress
A thoroughfare for freedom beat
Across the wilderness!
America! America! God mend thine ev'ry flaw,
Confirm thy soul in self-control,
Thy liberty in law!
O beautiful for heroes proved In liberating strife,
Who more than self their country loved,
And mercy more than life!
America! America! May God thy gold refine
Till all success be nobleness,
And ev'ry gain divine!
O Beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam,
Undimmed by human tears!
America! America! God shed His grace on thee,
And crown thy good with brotherhood
From sea to shining sea!
Monday, July 11, 2011
Great depression and Keynesian economics
Keynesian economics says that to improve the economy, government should increase spending AND/OR cut taxes. Taxes should not be increased during times of severe recession or depression. The massive spending effort of WWII is what brought about US economic recovery not Roosevelt's meager Public Works projects.
Times are very different today. Prior to the Great Depression the average income of workers was around $750 a year and all the wealth was in the hands of the top one percent of Americans. We can't even imagine a world such as this, but we should read and learn.
Wealth is distributed very differently than just a short century ago. There's a lot of cash being held by big business. Perhaps the "or cut taxes" approach of Keynesian economics needs to be explored before anymore big government spending.
Times are very different today. Prior to the Great Depression the average income of workers was around $750 a year and all the wealth was in the hands of the top one percent of Americans. We can't even imagine a world such as this, but we should read and learn.
Wealth is distributed very differently than just a short century ago. There's a lot of cash being held by big business. Perhaps the "or cut taxes" approach of Keynesian economics needs to be explored before anymore big government spending.
Saturday, June 18, 2011
Tax Changes I'd Like to See
Our retirement income fluctuates depending on our investments, but with all our itemized deductions and personal exemptions we paid about 10% in federal income tax this year. I'm not complaining, mind you, 10% is a reasonable rate considering all our other expenses. We have two monthly mortgage payments, a car payment, monthly health, home and life insurances, utility bills, and don't get me started on the increase cost of food and gas.
Professional tax preparers have caused us to pay so much in additional taxes and fines over the years that I decided to try it myself this year. It was ugly - It took me two full days to understand and complete all the various forms and worksheets. I've come to the conclusion that I would prefer eliminating all tax deductions, personal exemptions, and loopholes than go through that again.
Why not institute a graduated flat rate tax? These rates are suggestions and would need to be adjusted so that tax totals collected would not decrease, although I wouldn't be surprised to see more money coming in than less.
People earning less than $25,000 a year would pay zero federal income taxes, but would still pay FICA and Medicare as they already do. They would only need to fill out a postcard and send that in along with their W-2 form from their employer.
People earning $25,000 to $250,000 would pay 10% tax, devoid of any exemptions or deductions.
People earning $250,000 to $500,000 would pay a flat tax of 15%.
People earning $500,000 to $1,000,000 - 20% flat tax.
$1,000,000 plus wage earners would pay 25% flat tax.
Capital gains tax rates would be scaled the same as wages, with no exemptions, deductions or loopholes:
1. Those making $20,000 to $250,000 in capital gains would pay 10% in taxes,
2. $250,000 to $500,000 in capital gains would pay 15%,
3. $500,000 to $1,000,000 - 20%,
4. $1,000,000 and above - 25%.
Those earning less than $25,000 in capital gains would pay no tax. This would help provide younger and senior lower income earners with an opportunity to build investments and wealth for the future or to offset future medical expenses.
Professional tax preparers have caused us to pay so much in additional taxes and fines over the years that I decided to try it myself this year. It was ugly - It took me two full days to understand and complete all the various forms and worksheets. I've come to the conclusion that I would prefer eliminating all tax deductions, personal exemptions, and loopholes than go through that again.
Why not institute a graduated flat rate tax? These rates are suggestions and would need to be adjusted so that tax totals collected would not decrease, although I wouldn't be surprised to see more money coming in than less.
People earning less than $25,000 a year would pay zero federal income taxes, but would still pay FICA and Medicare as they already do. They would only need to fill out a postcard and send that in along with their W-2 form from their employer.
People earning $25,000 to $250,000 would pay 10% tax, devoid of any exemptions or deductions.
People earning $250,000 to $500,000 would pay a flat tax of 15%.
People earning $500,000 to $1,000,000 - 20% flat tax.
$1,000,000 plus wage earners would pay 25% flat tax.
Capital gains tax rates would be scaled the same as wages, with no exemptions, deductions or loopholes:
1. Those making $20,000 to $250,000 in capital gains would pay 10% in taxes,
2. $250,000 to $500,000 in capital gains would pay 15%,
3. $500,000 to $1,000,000 - 20%,
4. $1,000,000 and above - 25%.
Those earning less than $25,000 in capital gains would pay no tax. This would help provide younger and senior lower income earners with an opportunity to build investments and wealth for the future or to offset future medical expenses.
AARP Open to Future Social Security Cuts
AARP wakes up to reality, kinda. Their new stance is:
1. Cuts should be minimal and affect "future" recipients only,
2. Cuts should be offset by a tax increase, and
3. SS Trust Fund should not be raided to pay down the deficit.
The thing that gets me is that the SS Trust Fund has been raided by Dems and the GOP for every hair-brained spending program you can imagine, but it's hands off the surplus to help pay off our national debt. Sounds a bit cockeyed to me.
How about eliminating the FICA (payroll tax) ceiling and using the SS surplus to help pay off our debt until it is needed by new retirees in about twenty years and not touching the Fund for any spending programs? This won't affect any working stiff earning less than than $106,800 a year. Even the Medicare payroll tax has no wage limit. I wouldn't even mind if Congress waived this increase for themselves (as they do for everything else) if that's what's holding things up.
1. Cuts should be minimal and affect "future" recipients only,
2. Cuts should be offset by a tax increase, and
3. SS Trust Fund should not be raided to pay down the deficit.
The thing that gets me is that the SS Trust Fund has been raided by Dems and the GOP for every hair-brained spending program you can imagine, but it's hands off the surplus to help pay off our national debt. Sounds a bit cockeyed to me.
How about eliminating the FICA (payroll tax) ceiling and using the SS surplus to help pay off our debt until it is needed by new retirees in about twenty years and not touching the Fund for any spending programs? This won't affect any working stiff earning less than than $106,800 a year. Even the Medicare payroll tax has no wage limit. I wouldn't even mind if Congress waived this increase for themselves (as they do for everything else) if that's what's holding things up.
Tuesday, April 5, 2011
The Third Rail
We frequently hear the term "Third Rail" mentioned as a warning cry in political discussions on TV and in newspapers. What is this Third Rail in politics? Well, it's a metaphor for an idea that is so untouchable that it would be political suicide for any politician to consider changing or modifying in any way. Social Security and Medicare are definitely "Third Rail" topics.
Whichever political party seriously brings it up for modification will face a barrage of attacks that will overwhelm common decency and common sense. Politicians would rather bankrupt our county and carry this burden into future generations that they will not be around to see. They talk about ten year plans for keeping Social Security solvent as though some magical solution to solve all our problems will come about in some imaginary future.
My husband and I are retired and living on an income that is based on 40% Social Security and 60% pension and interest from annuities. I worked twenty-four years contributing into SS and another twenty-four years contributing into a state retirement plan. The amount I receive from SS is only $655 per month minus $96.50 for Medicare. My husband's SS is just under $20,000 a year minus his monthly charge of $96.50 for Medicare. We would find it difficult to live on SS alone and, due to a minimum amount of planning in our youth, we don't.
If politicians really wanted to "save" Social Security and Medicare they'd make the hard decisions - increase FICA contributions to ten percent over the next ten years, have people retire later, eliminate the $106,800 contribution cap. The truth is the Social Security Trust Fund doesn't exist as a pool of money sitting some place collecting interest. It is just an accounting tool to transfer money from current workers to people who are retired or on disability. The money collected from younger workers goes in one door and out the other to the retired or disabled. As long as there were more workers contributing more money than retirees needed, it seemed like a good idea - but there was a wrinkle in that plan.
Presidents since Ronald Reagan have also been borrowing some of the surplus of collected SS taxes and issuing big fat IOUs known as "special issue" bonds, supposedly with the intention of paying it back before it was needed. The government has been spending the surplus revenue from SS on anything from soup to nuts. It's not unlike borrowing from your kid's piggy bank and leaving a note.
Beginning in 2018 the federal government has to start paying back all the IOUs and in 2042, should nothing be done to prevent it, Social Security will go bust. Seniors and the disabled are not going to wake up the first day of 2042 to find themselves penniless, the pain is going to start much earlier. Should I live to be 100, I may see this all unwind. Very scary thought.
Whichever political party seriously brings it up for modification will face a barrage of attacks that will overwhelm common decency and common sense. Politicians would rather bankrupt our county and carry this burden into future generations that they will not be around to see. They talk about ten year plans for keeping Social Security solvent as though some magical solution to solve all our problems will come about in some imaginary future.
My husband and I are retired and living on an income that is based on 40% Social Security and 60% pension and interest from annuities. I worked twenty-four years contributing into SS and another twenty-four years contributing into a state retirement plan. The amount I receive from SS is only $655 per month minus $96.50 for Medicare. My husband's SS is just under $20,000 a year minus his monthly charge of $96.50 for Medicare. We would find it difficult to live on SS alone and, due to a minimum amount of planning in our youth, we don't.
If politicians really wanted to "save" Social Security and Medicare they'd make the hard decisions - increase FICA contributions to ten percent over the next ten years, have people retire later, eliminate the $106,800 contribution cap. The truth is the Social Security Trust Fund doesn't exist as a pool of money sitting some place collecting interest. It is just an accounting tool to transfer money from current workers to people who are retired or on disability. The money collected from younger workers goes in one door and out the other to the retired or disabled. As long as there were more workers contributing more money than retirees needed, it seemed like a good idea - but there was a wrinkle in that plan.
Presidents since Ronald Reagan have also been borrowing some of the surplus of collected SS taxes and issuing big fat IOUs known as "special issue" bonds, supposedly with the intention of paying it back before it was needed. The government has been spending the surplus revenue from SS on anything from soup to nuts. It's not unlike borrowing from your kid's piggy bank and leaving a note.
Beginning in 2018 the federal government has to start paying back all the IOUs and in 2042, should nothing be done to prevent it, Social Security will go bust. Seniors and the disabled are not going to wake up the first day of 2042 to find themselves penniless, the pain is going to start much earlier. Should I live to be 100, I may see this all unwind. Very scary thought.
Sunday, March 6, 2011
A Tax Story
I am very thankful to the rich who pay 85% of the taxes in this country. I personally don't believe that anyone should pay more than a total of 30% in local, state, and federal taxes combined. Giving more than a third of your income to government each year goes beyond good citizenship. It approaches usury.
So I was surprised when I heard this story - a resident living in a very pricey apartment complex in Washington DC with units costing 1.2 million dollars pays only 15% in federal taxes thanks to IRS loopholes, deductions, etc,, but the janitor working in that same building earning $35,000 annually pays a tax rate of 25% in federal taxes alone. The janitor also pays local taxes and FICA taxes on his entire income. The resident also pays local taxes on his adjusted gross income and FICA taxes on the first $106,800 of his income.
This inequity bothers me. I'm not looking to milk anyone dry, but a flat tax and an elimination of loopholes, deductions, and exemptions might actually bring in more revenue, give a break to the lower income people, and not overtax those earning higher incomes.
So I was surprised when I heard this story - a resident living in a very pricey apartment complex in Washington DC with units costing 1.2 million dollars pays only 15% in federal taxes thanks to IRS loopholes, deductions, etc,, but the janitor working in that same building earning $35,000 annually pays a tax rate of 25% in federal taxes alone. The janitor also pays local taxes and FICA taxes on his entire income. The resident also pays local taxes on his adjusted gross income and FICA taxes on the first $106,800 of his income.
This inequity bothers me. I'm not looking to milk anyone dry, but a flat tax and an elimination of loopholes, deductions, and exemptions might actually bring in more revenue, give a break to the lower income people, and not overtax those earning higher incomes.
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